Directors' Resolution
Also known as: Board Resolution, Resolution of Directors, Round-Robin Resolution.
What is Directors' Resolution?
A directors' resolution is a formal decision of the board of directors, recorded in writing, authorising company action. Under Section 74 of the Companies Act 71 of 2008, resolutions may be passed at a quorate meeting or by unanimous written round-robin, and form the basis for binding external commitments and internal authority.
Drafted and reviewed by
Attorney & Founder, My-Contracts.co.za · Legal Practice Council of South Africa (LPC F17333)
Definition and context
A directors' resolution is the formal record of a board decision authorising the company to take a specific action — from opening a bank account or appointing signatories to approving a major transaction or declaring a dividend. The resolution is the evidentiary proof that the directors, acting as a board, have exercised their statutory authority under Section 66 of the Companies Act 71 of 2008 to manage the business and affairs of the company. Counterparties (banks, lenders, regulators, acquirers) routinely require a certified directors' resolution as a condition precedent to any material transaction.
Section 74 of the Companies Act permits directors to pass resolutions in two ways: at a board meeting where a quorum (as specified in the MOI, or a majority by default under Section 73) is present, by a majority of votes cast unless the MOI requires a higher threshold; or by unanimous written round-robin resolution where all directors sign or acknowledge agreement in writing — including by email under ECTA. Electronic participation in meetings is permitted under Section 73(3) provided all participants can hear each other. The resolution must be recorded in the minute book (Section 73(6)) and signed by the chairperson; many banks and regulators require certified copies bearing the company seal or the company secretary's attestation.
In practice, the directors' resolution is the connective tissue of corporate governance. It is required for opening bank accounts and authorising signatories; entering financing transactions; issuing shares and authorising share buy-backs; approving annual financial statements; declaring dividends (paired with the Section 46 solvency-and-liquidity acknowledgement); appointing senior officers; commencing or settling litigation; executing material contracts; and commencing business rescue. Well-drafted resolutions cite the specific statutory power invoked (for example, Section 46 for distributions, Section 44 for financial assistance), identify the authorised signatories by name and position, and are accompanied by supporting documentation. Failure to obtain or properly record a resolution can render a transaction voidable at the instance of the company — though Section 20 protects bona fide third parties relying on ostensible authority.
Where this term lives in law
Companies Act 71 of 2008
Sections: 20, 66, 73, 74, 76
Governs the incorporation, governance, and winding-up of companies in South Africa.
Frequently asked questions
How is a directors' resolution passed?
Under Section 74 of the Companies Act 71 of 2008, a directors' resolution is passed either at a quorate board meeting by a majority of votes cast (unless the MOI requires a higher threshold), or by a unanimous written round-robin resolution signed or acknowledged by all directors. Electronic participation in meetings and email acknowledgement of round-robins are both permitted.
Does a round-robin resolution need to be unanimous?
Yes — Section 74(2) requires all directors entitled to vote to sign or acknowledge the written resolution for it to have effect without a meeting. This is stricter than shareholder written resolutions (which require only the same majority that would pass the resolution at a meeting). If unanimity cannot be achieved, a formal meeting must be convened.
What is the effect of a defective directors' resolution?
Internally, a transaction authorised by a defective resolution may be voidable at the company's instance, and directors who act on it may be in breach of Section 76 fiduciary duties. Externally, Section 20 of the Companies Act protects third parties who deal with the company in good faith without knowledge of the defect, so the transaction is usually binding on the company even if the internal authorisation was flawed.
Must a directors' resolution be in writing?
A resolution passed at a meeting need not be in writing at the time of passing, but must be recorded in the minute book under Section 73(6) — which is functionally a written record. A round-robin resolution under Section 74(2) must be in writing from inception. Third parties (banks, regulators) almost invariably require a certified written copy, so practical discipline is to reduce every resolution to writing and have it signed.
Contract templates using this term
2 templates reference Directors' Resolution.